When a seller may want to wait to make agreed-upon repairs

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12/03/2014 | Author: Editorial Staff

On the fourth day of a 10-day option period, my seller client started fixing five items that he agreed to repair in an amendment (TAR 1903). On the sixth day, the buyer sent the seller a notice terminating the contract under his termination option in Paragraph 23. My client is upset because he already repaired two of the five items. Is a buyer allowed to terminate during the option period even after the seller has started making repairs?

Yes. A buyer does not automatically give up his right to terminate the contract under the termination option when the seller agrees to make repairs. However, if the buyer checked Paragraph 7 of the amendment, he would have waived his right to terminate the contract under the option period once the amendment was effective.

Remember that under Paragraph 7F of the TREC contracts, the seller is obligated to complete all agreed-upon repairs prior to closing unless the parties have otherwise agreed in writing. A seller might want to wait to do repairs until after the buyer’s right to terminate under the termination option has expired or has been waived according to the terms of the contract.

Comments

Monica Davila on 12/04/2014

Wow! Thank you all for this valuable info and guidance. It doesn’t matter how long ago we’ve taken the test, it is always refreshing to listen/read ideas, comments to make us and our clients better.
Thank you!

Diana Aldeerman on 12/04/2014

Lane is correct regarding repairs being made by licensed techs especially when repairs such as AC, HEAT, ELECTRICAL AND PLUMBING are to be performed.

Even after almost 38 years, I still write the words “all repairs to be completed by licensed technicians” in the amendment when requesting Seller repairs. Many “handy-man” sellers just assume that they can do things such as install GFCIs.

Unfortunately, The average agent really is not aware of the terms in Paragraph F of the contract.

At the same time, if all parties agree that the seller can personally make the repairs, the seller can do so; agreement just needs to be in writing. SELLERS DO NOT PROVIDE WARRANTIES WHICH IS THE PRIMARY REASON THAT SELLERS SHOULD NOT MAKE REPAIRS that involve mechanical, electrical, plumbing and structural issues.

Jose Figarella on 12/04/2014

Why is someone that has 25+ years of experience, took a test 25+years ago and knows everything like Evelyn J. doing in a blog that is meant to educate people.

The Option Period gives the right to the buyer to terminate the contract for any reason, at any time before the option expires. the only time the buyer/s “loses” this right, is if they give it up by checking #7 in the Amendment (TAR-1903).
If you are the listing agent you want to pay close attention to it.

Irma Castro on 12/04/2014

Thank you for your unkind words!! First time participating on this blog and meant for my subject to be discussed at a later time.

CA on 12/04/2014

I really wouldn’t consider that an “end of the world” problem for the seller. The next buyer that is coming along would more than likely request the same repairs, and the seller will be required to disclose most of these problems now that they have been brought up through the first inspection. If they are major repairs, it would diminish the value of the home by not doing them. It they are small cosmetic repairs, this can only enhance the appearance of the home for future prospects.

Evelyn Joseph on 12/04/2014

Why does someone who would asked this question even have a real estate license? This paragraph says absolutely NOTHING about repairs!! If the real estate salesman license exam is still anything like it was when I took mine 25+ years ago, the state does very little to prepare wannabe agents for the field. Step in UP TREC.

Irma Castro on 12/04/2014

Good morning! First of all thank you for your comments. I always take time to read them. Its another way of educating yourself and refreshing the mind. I know in some areas of Texas its booming out there (sellers market), however in this part of Texas it is still a buyers market. We have good number of well priced listings(new homes and resales), that are just not selling. We have 2 or more tours for real estate agents, with food(homemade), prizes ,open houses, web advertising and newspaper advertising. Can anyone suggest some fresh ideas for a buyers market?

Regards,

Irma Castro

Pamala Johnson on 12/04/2014

My experience (20 years) was mainly accrued in Iowa, but in the past yr as a Texas Licensed agent inspections have been an issue. But using the Iowa practice of requiring the buyers to line up their own inspectors, repair person and bids I have been able to avoid 2 potential explosive situations with the buyers I represented. While the sellers, also, got bids, in the end the sellers were more than happy to allow the buyers bids to stand. I realize TX is a seller’s state, but many seller’s appreciate additional bids and if that makes the buyers satisfied and it closes the deal, well….it works. I agree paragraph 7 should be explained to all parties.

Diane Jones on 12/04/2014

When negotiating for repairs, you should always have the buyer check #7 on the Amendment(for repairs) which says that “buyer waives their right to terminate the contract for which the Option Fee was paid”. Once the seller signs the Amendment agreeing to do the repairs that buyer has asked for, the Option Period ends at the same time.

Mark McNitt on 12/03/2014

I advise buyers that a seller would likely ask them to terminate the rest of their option period if they agree to their repair request. If the option has not been terminated, it is still in effect until the expiration date (paragraph 23 of the EM contract). And yes, the buyer can terminate the contract even if the repairs have been made.
Listing agents need to advise their sellers on how to proceed once a buyer makes a request for repairs.

Kerry Duncan on 12/03/2014

10 DAYS to two weeks was what I meant to say.

Kerry Duncan on 12/03/2014

A Seller can still make repairs, both parties just have to agree.

As to cash in lieu of repairs, I’ve never had an issue with changing the terms of the loan. But, we rarely see anything past 14 day OP here… that typically leaves another 10 to 2 weeks… most files don’t go to UW until 4 days or so before closing.

Carleen on 12/03/2014

The key to giving the buyer “money in lieu of repairs” is DO NOT USE THIS PHRASE ANYWHERE on the amendment. Remember, if there is a monetary change in the contract, it has to be submitted to the underwriter. If money is exchanged between Seller and Buyer, use Paragraph 4 in the amendment. If the amount is a number that is reasonable for the price of the home, such as less than $2000 for a contract price under $200,000 (perhaps $5000 for a $600,000 contract) most lenders will accept that. You also need to be aware of whether the Buyer has a relocation package that will pay some items. Most relocation companies do not pay for taxes and homeowner’s insurance-money that goes into escrow. That is what the Seller’s contribution can go toward. All total concessions cannot be more than Buyer’s actual closing costs. If the numbers are close, I suggest that the Buyer get a copy of the invoices for inspections (general, termite, pool, etc.) that usually have to be paid at time of services and submit to the title company. The title company can show them on the closing statement as POC (paid outside of closing) and the Buyer can accept a credit for those items. You need to work with your title company to have everything on the closing statement. If I represent a Seller, I will always check Paragraph 7 to waive the rest of the option period if the Sellers are paying money or most especially if the Sellers are going to do any repairs. Conversely, I explain the options to the Buyers I represent and tell them a seller would feel better about accepting the Buyer’s amendment if the Buyer submits it with Paragraph 7 checked.
You can eliminate a lot of problems by having the Sellers identify and fix all of those nit-picky problems before you put the house on the market. Before there are contract negotiations and inspections, the Seller can fix those minor items, which show up. (Leaky faucet, caulking, running toilet, and those other handyman items). When I list a home I start at the front porch with the Sellers and start looking…
My pet peeve is when I am showing Buyers at the front door and the door bell is BROKEN. If that is not working, what else has been neglected?
It may take a week longer to get the house on the market, but I am pricing homes very close to market and having the seller fix up, pack up, and clean up.

We are not just taking offers - we are getting multiple bids over list price in our market!

Lane Mabray on 12/03/2014

Randy, I do agree with you but I am finding that lately the lenders’ underwriters don’t like “giving cash at closing”. Tried to do that on one that finally closed last week and the lender would not allow the seller to give $500 toward buyers closing costs on an amendment (sellers were living out of state) and we all know the buyer and seller have to sign a paper at closing saying no other agreement or i.e. cash between buyer and seller has exchanged. As long as buyer has their walk thru and of course all the receipts, I have them sign that TREC form that says they had their walk thru and had their inspections. I did have one of my own buyers NOT do a walk thru and I had them sign that they chose not to. Anyway most are getting a home warranty and repairs that have been done are usually warranted for 30 days…At least the contractors I insist that my sellers use….So I rarely have had a problem…But yes, IF the lender allows it and the buyer agrees, I too like the buyers to do their own repairs.

Randy Wilson on 12/03/2014

As a listing agent I always start with “cash in lieu of repairs” when dealing with a buyer’s requested repair list. I don’t want my seller (or the people they hire) being forever responsible for the quality of repairs. An example, when I sold my personal home a few years back the buyer wanted the fence replaced (among other things). The fence was 13 years old and decidedly in need of replacement. I offered them cash and they, at first, said no. So I told them to replace the fence I would go to home depot and purchase the 8 foot sections of white pine (cheapest fence sections) and nail them up to the existing posts myself. If they were level they would be lucky. But if they wanted me to have the fence replaced it would be the absolute cheapest way I could do it. The took the cash, even though when I drive by the house today, seven years later, my original fence looks even that much worse as they used the cash for something else. In most cases I have found that buyers are perfectly willing to accept cash in lieu of actual repairs.

Doris Snipp on 12/03/2014

Paragraph 7 is already a misunderstood paragraph with agents doing all sorts of things to cope and understand this paragraph including leaving it blank. I think your answer can likely be misconstrued. Unless it is a cash offer the seller would be well advised to wait until the option period is over. The exception would be a condition that would lead to the home deteriorating due to the issue such as active termites, leaks, etc. The other part one might want to be cautious when negotiating repairs is to request licensed personnel for repairs involving HVAC system or plumbing system to name a few. I would also want a roofer who works full time in the roofing business for a named company or his own business. There are many items to address such as no wood putty to repair rotted wood or the use of Hardi Plank and not a substitute. I have noted that many home warranty companies require the HVAC company to use Stop Leak prior to any repairs being made. Stop Leak can last up to 30 days which would be beyond closing date thus leaving the buyer to assume any cost in replacement of an HVAC system not covered by the policy. Repair requests and negotiation of the repairs is fraught with peril and many times can leave the agents paying for the misunderstood intent of repair requirements.

Lane Mabray on 12/03/2014

Also be sure that the seller understands that he personally CANNOT do these repairs himself….He must hire someone else who is either licensed or does repairs for a living.

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